Investing in the Future of Default Servicing
April 11, 2018
Source: DS News
Editor’s Note: This story was originally featured in the April issue of DS News, out now.
With a quarter of 2018 under our belt, it’s clear that our prediction—that the financial service industry will continue to place a high emphasis on strategic technology investments—was right. Technology modernization and digital transformation are among the top reasons banks, credit unions, lenders, and servicers are investing and updating systems. These organizations are looking for solutions to overcome some of the same challenges the industry has faced for years, such as the need to keep pace with increased regulations, provide efficient service at a lower operational cost, and easily access the crucial information they need to make smart decisions.
The default servicing industry in particular faces extraordinary challenges to meet the needs of homeowners, investors and industry regulators to increase transparency and consistency within processes and drive accountability for decisions. We’re seeing emerging technology help servicers streamline, automate, and integrate operations to eliminate inefficient processes and keep up with changing regulations.
Increased Self-Service Avenues
The need for self-service channels extends through all parts of the loan process, from origination to funding, closing, and servicing. Borrowers require more self-service avenues to not only originate a loan request but also to meet the transparency demands through the process to get timely and accurate updates. This need exists for servicing as well.
Modern technology alone can provide the level of transparency required. Websites, portals, cloud-based sharing platforms, and mobile integrations are all examples of various methods by which lenders and servicers create a more fluid and transparent loan experience for their customers. The lending world is adopting these types of technologies at a rapid pace to stay ahead of the competition.
Better Integrations for Data Collection
The mortgage industry relies heavily on data. Often, information is gathered, stored, and retrieved from multiple places, creating silos that are not easily accessible from the primary line of business application one is working in when they need it. This process causes extra steps and wasted time bouncing between apps to find the right information. Many servicers are leveraging enterprise information platforms to remove information silos and connect data, regardless of where that information originates.
These information platforms work as a hub to connect disparate IT systems and data, so information is updated simultaneously. This helps employees evaluate loan documents and packages faster, knowing the information is accurate and make the best decision for the organization. With increased confidence that data is current, regardless of which application an employee is accessing that data, they gain time and confidence back.
Automated Data Validation
In many industries, it’s vital to ensure data is correct from the moment it is ingested to avoid costly mistakes later. New regulations are driving demand for quality control and transparency throughout the process, extending servicer accountability for actions of third-party providers. Automated data extraction technology takes the burden of manually gathering, reviewing, and approving information off staff, removing this tedious and error-prone task from their job.
Modern enterprise information platforms can extract the right information from a form using data extraction and validate that information by creating configurable rules per data field. The capture capabilities within these applications can perform mathematical functions or develop procedures by accordance with specific business processes, to further validate the information pulled from a document and compare it with values that exist in other systems. Once data is extracted, exceptions can be flagged and presented to staff to verify, along with the corresponding documentation, allowing for a quick and easy exception review process.
Sophisticated Business Process Management/Workflow
As the financial services industry continues to embrace technology to promote fully digital processes, functionality such as business process management (BPM)/workfl ow becomes essential to automate time-consuming and manual processes. Transparency and consistency are among the top reasons servicers are seeking workflow–to know every process is following the same steps, ensure compliance, and see a holistic view of the process to determine where bottlenecks hinder efficiency. It can become overwhelming to manage the sheer amount of documentation required within default servicing procedures–if the information is lost it becomes risky as well.
The best workflow solutions offer servicers capabilities to keep processes moving as quickly as possible, resulting in lower processing costs and increased consumer satisfaction. Not only do these solutions route the right information to the right person, at the right time, they also include timers and reminders to keep procedures moving and meet deadlines to speed loan modifications, foreclosure, and REO. Flagging of incomplete data prevents issues arising from missing information.
Servicers have historically relied on paper files sent from their lenders, brokers, and correspondents. As the lending industry moves toward digitization, this reliance on paper can be detrimental to a servicer’s ability to scale with the necessary demand. Servicers recognize that the ultimate cost on a per-loan basis directly correlates to their ability to accurately collect documents and data on the loans they receive and respond quickly to the increased demand.
Technology has provided advantages for lenders and servicers to standardize the coordination, packaging, and delivery of loan files for processing. From meeting the individual requirements of each lending partner to ensuring compliance with federal mandates for uniform data delivery, technology can fill those gaps that the paper-based world left behind. Technologies that allow lenders to package loans in specific stacking orders, deliver files through enterprise file sync, and share platforms and give servicers the capabilities to capture, classify, and extract relevant data can have the ability to fundamentally transform how a servicer ultimately thrives in today’s competitive lending environment.
Some of the biggest struggles the industry continues to face include eliminating paper, garnering the right information, and promoting a (mostly) digital business. Using core functionality within an enterprise information platform, which works as an information hub to gather all information, servicers can connect IT systems, people, and processes to increase confidence in decisions and fully automate procedures. Decreasing reliance on paper ensures all information is included and bolsters compliance efforts to meet industry regulations. It provides increased transparency into processes, so managers know exactly where processes lie at any particular time. Tracking every action on a document makes audits easier.
Increased self-service, better technology integrations, automated data validation, BPM/workflow tools, and electronic delivery are some of the biggest technology trends we’ll continue to see lenders and servicers implement to support their digital transformation efforts.